Bank of Canada governor Mark Carney was in Waterloo last week. He’s repeatedly warned over the past year about excessive consumer borrowing – especially for mortgages, but this time he further explained his concerns noting that investors outside Canada are responsible.
The bond market is closely linked to the Mortgage Market. I talked about the difference between fixed-rate and variable mortgages here.
Interest rates were lowered back in 2008 to encourage borrowing and revive the economy. However much of the lending meant for businesses flowed instead to consumers in the form of mortgage money and now Canadians have huge household debt levels.
As for the bond investors, there is no solution here. We can’t really ask them to stop investing in our bonds – Canada is seen as a solid investment in terms of the world economy.
Meanwhile, there are concerns that reforms to CMHC (the insurer of high ratio mortgages) may cause the market to slow too much. Over the past few months I’ve talked many times about how the federal government has been monkeying with the CMHC, limiting its lending power thus drying up the availability of easy credit.
Outside of tinkering with the CMHC, the federal government is actually hoping the mortgage market fixes itself. Instead of imposing tighter mortgage rules on lenders, banks are being encouraged to self-regulate and are actually becoming more stringent with their lending criteria.
What’s the Kitchener Waterloo real estate market like?
Kitchener Waterloo residential real estate sales were up 8.7% (664) in March over March 2011 and up 1.8% for the year. The average “days on market has gone up to 48 days. In 2011 it was 43 days. In 2011 it was 49.
We are still at about the same “sales to active ratio” (21.5%). It was 20.8% in 2011.
Sales price to list price ratio this in March was 98.2% and year to date 98.3%. This means that the average home sells within 98% of its asking price.
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